MANGNIRAM BANGOR CO , Vs. RE

JUDGEMENT

(1.) The question submitted by the Commissioner of Income-tax is-Whether in view of the facts and circumstances of the case the sum of Rupees two lacs fifteen thousand one hundred and seventy-six incurred for the purpose mentioned in the said Rule nisi is an allowance within the provisions of Section 10(2)(ix) of the Indian Income-tax Act, being Act XI of 1922.

(2.) The assessee is a registered firm carrying on business in Calcutta. Its business includes dealing in stocks and shares, silver and gold, and money-lending. It also has a cloth agency and owns a jute press.

(3.) In the firms accounts under the heading business a deduction was made of a sum of Rs. 2,24,707 on account of litigation expenses. This sum was made up of a somewhat smaller sum of Rs. 2,15,176 which was spent on a particular civil suit and also other legal charges making up the balance of Rs. 2,24,177. We are only concerned with the item of Rs. 2,15,176. That was money spent by way of legal expenses in defending suit which was brought against the assessees in the Court of the Subordinate Judge at Purulia in Bihar. That suit arose out of a transaction which this firm along with one Kedarnath Daga had in the year 1921 with a firm called Siddons Co., Siddons Co., apparently consisted of Samuel Henry Siddons, who is described as a merchant, and Rasaraj Biswas, also described as a merchant. Siddons Co., took a lease sometime previous to 1921 from the Raja of Panchkote of certain coal bearing lands in Bihar. They granted prospecting licenses to certain persons and received therefor salami and were due to receive rents and royalties. Siddons Co., borrowed a sum of about rupees ten lacs from the assessees and Daga jointly, and in order to secure this loan Siddons Co., executed two documents on March 31, 1921. The first of these documents was in the nature of a mortgage deed in which the assessees and Daga were described as the mortgagees and Siddons Co., as the mortgagors.